Lack of funding slows down growth of India's B2B segment

India's B2B segment in the ecommerce ecosystem has tremendous potential but has lagged behind due to lack of funding from angel investors and venture capitalists since it made its presence felt around four years ago.

With a population of 1.3 billion, India has the potential to emerge as one of the biggest markets in B2B segment alongside the US and China. While the market is considered as an emerging segment of the overall ecommerce industry, with a large number of wholesale buyers and sellers interacting at different marketplaces across the country, it needs proper attention from said investors.

IndiaMART, Tolexo, Amazon, BazarA2Z, StoreRoom.in, and Industry Buying are among the major B2B firms in India but IndiaMART, the country's largest online marketplace connecting buyers with suppliers, is said to be the market leader and enrolled 100,000 premium customers on their platform early this month.

A report from Ahmedabad-based ecommerce consultant firm Ecumen said that globally B2B is set to take its bigger leaps compared with B2C. While the global B2B ecommerce market was expected to reach $1.7 trillion by 2015 and is twice as big as the B2C market, within India its growth is less than that of B2C.

Besides funding, there are inherent problems which have cast their shadow on the B2B segment's growth. B2B technology implementation is difficult, and reaching the target profession requires approached e-marketing and differential marketing.

"B2B ecommerce in India has to develop strong business and logistical connections with exporters and businesses to ensure smooth product delivery. Interstate taxation is also a big problem wherein SMEs are restricting their online presence due to thinner margins online," the report said.

Founder and principal consultant of TecHybrid IT Solutions Sanjay Govil said that while the ecommerce industry has picked up considerably, in India the growth of B2B pales in comparison with B2C for various reasons including processes and systems which do not promote the segment.

"The processes behind transactions are not ecommerce friendly and the B2B enterprises are not funded by the angel investors and venture capitalists. This is surprising as the cash flows and opportunities are greater for B2B market and the companies are able to get breakeven better than B2C firms," Govil told ZDNet.

According to him, there is huge potential for B2B segment in the goods and services sector. The growth is happening in the goods side while it is less in services, Govil opined.

For the startups in B2B, selling goods and ensuring supplies online given their limited resources is a Herculean task as they need to win the confidence of the consumers. Due to this, these ventures are yet to taste success in the market.

The private equity should look at these ventures for their development. Those who launch the startups can put in seed money but it is the angel investors and venture capitalists who should accelerate the pace, Govil added.

Delhi-based serial entrepreneur, startup specialist and angel investor Rajesh Butta said: "My guess is that B2B does not come into public gaze and people do not know what is happening in that domain. This is the reason why investors are not looking at this segment."